iRobot's quarterly revenue soared 53.8% year over year to $326.9 million -- comfortably ahead of the $318.8 million investors were anticipating -- and translated to GAAP net income of $4.6 million, or $0.16 per share.
But that bottom line also includes a negative $0.41-per-share non-cash adjustment related to recent U.S. tax reform, as well as a positive $0.03-per-share tax benefit related to new accounting standards for stock-based compensation. Adjusted for those items, iRobot's earnings of $0.54 per share easily outpaced consensus estimates for adjusted EPS of $0.25.
iRobot's consumer revenue increased 47% year over year in the United States, 34% in Japan, and more than doubled in the Europe, Middle East, and Africa geography. And according to iRobot chairman and CEO Colin Angle, "Global household penetration of robotic vacuum cleaners remains extremely low, in the single digits." Combined with the potential for iRobot to drive incremental revenue from other products such as its Braava floor mopping line -- sales of which climbed 65% in the U.S. last year -- and the company is left with a massive runway for growth.
In addition, for the full fiscal year 2018 iRobot expects revenue in the range of $1.05 billion to $1.08 billion -- again well above the $1.02 billion investors were expecting. However, iRobot also sees that translating to full-year earnings per share of $2.10 to $2.35, which is below analysts' estimate for earnings of $2.70 per share.
But that's not necessarily a bad thing. During the subsequent conference call, Angle explained:
I want to reiterate that iRobot is committed to a profitable growth strategy, showing an improving top line and bottom line. But at this moment in time, with the market accelerating in its growth and competitive pressure coming into the markets, we made a choice to double down on ensuring we had adequate dry powder to drive that top-line growth. Some investors may be looking for more bottom-line growth. [...] This is a movement in time where over in the next three years the true winners in the consumer robot industry are going to be determined for the next decade.
In short, iRobot is consciously forsaking greater bottom-line profits to instead invest in driving revenue growth and taking market share as the home robotics industry accelerates in these early stages. Some bearish investors will undoubtedly view iRobot's approach as validation for their concerns over the recent rise of well-funded competitors like Shark and Dyson in the robotic vacuum market.
That said, Angle also noted that iRobot is set to introduce "several new products" in the second half of the year, though he declined to provide exact details on what those products are.
Finally, iRobot offered perspective on its goals for the next three years, outlining targets for revenue to grow at a compound annual rate of roughly 20% through 2020. Trending toward the bottom line, iRobot also set goals of maintaining gross margin in the 50% to 51% range (up from 49% in 2017), and for operating margin of 10% (up from 8.2% last year).
All things considered, investors couldn't have hoped for a stronger holiday quarter from iRobot. And the company offered plenty of reasons to be excited for the future. But it didn't do much to appease concerns over competition, and it's clear that the market wanted more on the bottom line looking forward.